1. Field of the Invention
The invention relates to a method and system of physician economic performance evaluation in which the relative medical difficulty associated with patients admitted by a particular physician is determined and, given that measurement, judgments made concerning the relative amount of inpatient resources that the physician required. Also, one application of the invention relates to a method and system of gainsharing of physician services in which a best practice norm is established for a plurality of classified diagnosis groups and an incentive pool is distributed to physicians by comparing physician performance to the best practice norm while meeting constraints on incentive distribution.
2. Description of the Related Art
Many strategies have been proposed and implemented that were intended to contain the rising cost of health care. For example, over the past decade, health maintenance organizations (“HMOs”) have received considerable attention. HMOs employ various strategies to incent and/or penalize health care consumers (enrollees), hospitals and physicians. Physicians are particularly important because they exercise ultimate judgment over medical decision-making. Consequently, HMOs employ a combination of strategies, such as “hands on” review over medical utilization decisions, coupled with discounts on physician fees in order to reduce physician costs, and to control the impact of physicians on other health care costs, such as hospital costs. These strategies are sometimes criticized as being indirect, complex and overly bureaucratic.
A different kind of healthcare cost containment strategy was implemented by Medicare in 1983: In that year, the federal program for the elderly replaced “reasonable cost” reimbursement for acute care hospitals with “payment by the case”. Specifically, beginning in 1983, Medicare reimbursed hospitals a fixed price for each Diagnosis Related Group (“DRG”). By reimbursing a fixed price for each DRG, hospitals were furnished economic incentives to reduce resource utilization. The payment system was known as the Medicare Prospective Payment System, or “PPS”.
New Jersey acute care hospitals continue to suffer their worst financial distress in recent history. A report issued by the New Jersey Health Care Facilities Finance Authority in June, 1999, suggests that a large part of the problem is New Jersey's Medicare length of stay which was 1.6 days over the national average, at that time. The report estimates that removing the costs associated with these excess days could save $600 million. Improved operational performance by hospitals, however, cannot be achieved without the active collaboration of the doctors. To achieve this necessary partnership, the New Jersey Hospital Association (NJHA) proposes a Demonstration to test whether or not Performance Based Incentives can improve the efficiency and effectiveness of hospital inpatient care for Medicare fee for service beneficiaries.
Under the Medicare Prospective Payment System (PPS), prospective payment by the case referred to as Diagnosis Related Group, DRG provides acute care hospitals with incentives to control unnecessary resource utilization. Diagnosis Related Groups (“DRGs) is a system of patient classification utilized by the federal government to pay hospitals. Under the Medicare Prospective Payment System (“PPS”), DRGs are utilized to pay hospitals a fixed price per case. Physicians, however, exercise ultimate control over such decisions and unfortunately, in this particular regard, the Medicare fee for service payment system that governs the reimbursement for physicians contains financial incentives to provide more services, even when medically unnecessary. Attempts to resolve this conflict of economic incentives have been unsuccessful. Medicare risk-based systems have failed to gain the confidence of both providers and beneficiaries.
Gainsharing has been a primary objective of the healthcare industry for many years. The need to align the economic incentives of hospitals and doctors (any payors) has grown more urgent as the economic fortunes of all parties have deteriorated. Pursued by many, it seemed that the goal was close to realization in the late 90s: Unofficial communication from the Office of Inspector General (OIG) seemed to recognize the importance of taking this next step. These hopes were dashed, however, when the OIG issued a formal statement in 1999 indicating that, while potentially of great value, “ . . . regulation of gainsharing arrangements requires clear, uniform, enforceable and independently verifiable standards applicable to all affected parties . . . ”
In a seeming reversal of its prior position, on Jan. 11, 2001 the HHS Office of Inspector General (OIG) suggested that it would permit the use of properly structured gainsharing arrangements to reduce hospital operating costs. Although gainsharing arrangements take numerous forms, they most often relate to services furnished within a single clinical specialty (e.g. cardiac surgery or oncology) and are executed directly between a hospital and one of the following individuals or groups: one or more individual physicians providing service in the clinical specialty; one or more group practices composed exclusively of physicians furnishing care in the clinical specialty at the hospital; or a single entity representing all staff or employed physicians furnishing care in the clinical specialty at the hospital.
Gainsharing arrangements typically include several common elements. The hospital contracts with participating independent consultants or physicians to analyze current operational practices within the clinical specialty. These practices include supply use, equipment use, operating room use, ancillary-service use, formulary restrictions, clinical protocols, nonphysician staffing, scheduling of procedures, bed-use review, and discharge assessment.
The physicians are expected to comply with standard policies, procedures, and protocols that reflect best practices as determined by clinical consultants. These best practices are reviewed and revised, as necessary, by physicians practicing in the clinical specialty to ensure that they are consistent with quality care. Any reduction in operating costs in the clinical specialty is documented by the hospital over a specified period after implementation of the best practices. The hospital then monitors whether the participating physicians meet mutually agreed-upon, objective benchmarks called quality safeguards for quality of care and patient satisfaction. Finally, if such quality safeguards are met, the participating physicians are paid a fixed percentage of the reduction in operating costs associated with implementation of the best practices.
It is desirable to provide an improved method and system for evaluating physician performance which can be the foundation for various cost containment strategies, such as gainsharing of physician services.